Broad classes of securities are traded in public markets. Securities traders wishing to buy or sell these securities often have the option to place a limit order to buy or sell a number or volume of a security at a specified price.
Typically, electronic trading venues (markets) automatically organize these limit orders by price, order of arrival, and possibly volume into an order book for securities traders wishing to buy (bid) or sell (ask or offer). Each time there is a change in the order book, the electronic trading venue transmits a market data message to the traders describing the nature of the change. Some examples of possible messages include refresh, giving initial state information for the order book; an insert, where a new limit order is placed on the book; an update, where the price and volume of the limit order can change; and a delete, where a limit order is removed from the book. Other kinds of messages are possible.
When given security may be traded on two or more public trading venues, a common practice in the securities trading industry is to create a consolidated order book from the individual order books of two or more public trading venues. Another common practice is to automatically compute and electronically distribute the best bid and offer (BBO) and the price at the midpoint between the best bid and the best offer for an order book. These calculations can be done on the order books of individual electronic trading venues or for an order book consolidated across multiple electronic trading venues.
Using an order book, the electronic trading venues automatically match or cross orders with matching or crossing prices of buyers (bid) and sellers (ask) for new or updated limit orders. Further, market orders, or other orders requiring immediate execution, are filled by matching full or partial limit orders until the required volume is reached in a process known as “walking the book.” In some cases, the electronic trading venues are required to match orders based on a consolidated order book of all venues listing a particular security.
As a result of the high volume of trading activity, the transmission rate of the market data messages generated by the multiple trading venues, with each of the electronic trading venues listing and trading many securities, can be quite large. For some classes of securities, order book market data message rates of several million messages per second are not uncommon.
This high message rate can present significant problems for electronic or automated securities trading organizations that wish to receive and analyze order book market data. Receiving and processing this massive volume of data with limited added time latency requires both high network bandwidth and a large amounts of computing capability. Moreover, the investments required to create and maintain this infrastructure is often impractical for many trading organizations. Conventional approaches fail to adequately resolve these data messaging and processing problems.
For instance, according to U.S. Patent Application Publication No. 2006/0253377, published Nov. 9, 2006, to Burns et al., discloses a trading system for hosting one or more electronic exchanges. The trading system receives bids to purchase and offers to sell from traders a tradeable object, which is listed at one of the electronic exchanges. The trading system further includes a data line that is used to carry order book information from the electronic exchanges, which is analyzed to find the best pricing and to automatically route trading orders.
U.S. Patent App. Pub. 2007/0038543, published Feb. 15, 2007, to Weinstein, discloses a system and method for managing financial market information. A processor is capable of generating a graphical depiction of the financial market information on a display. The graphical depiction includes a multidimensional representation of a broad range of market information for at least two financial instruments. The financial instruments may include multiple different classes of financial instruments, such as treasuries and futures. Different instruments may be selected and information, including basis information, relevant to the selected instruments may be displayed in a second window.
U.S. Patent App. Pub. 2007/0150407, published Jun. 28, 2007, to Gilboy, discloses a method and product for efficiently and intuitively placing a trade order through an order book display having an order display component and a market order book display component. The method includes dynamically displaying market information in the market order book display component, dynamically displaying order information in the order display component, placing an order by mobbing the order from the order display component into the market order book display component, and executing the order by releasing the order into the market order book display component.
U.S. Patent App. Pub. 2007/0294162, published Dec. 20, 2007, to Borkovec, discloses a system and method for allowing market participants to evaluate the likelihood of finding hidden trading volume. The model can predict hidden volume and assess the probability that a market order will be executed within the spread and better than the mid-quote. The cost per immediate execution can be assessed. Additionally, the best bid and offer prices from one or more trading venues are summarized and graphically displayed.
U.S. Patent App. Pub. 2009/0259598, published Oct. 15, 2009, to Stevens et al., discloses consolidated order book and market depth information from multiple fragmented markets, which includes a graphical representation of market depth and price points, balance, liquidity and volume-weighted average price for tradeable objects. The approach to computing the depth of an order book is extended to include computing and displaying a curve showing the average volume weighted quoted price on a plot with price on one axis and volume on the other axis.
Accordingly, a need remains for an approach to determining summary statistics for order books, which can facilitate efficient transmission of order book data in data messages over an electronic data network by lowering the number of messages transmitted.